Europe Bond Curves Flatten as Inflation Softens, Supply Dries Up
- Dearth of summer bond auctions as ECB buying continues
- Look for carry in 30-year French, Italian bonds: NatWest
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European bond curves are flattening as weaker core inflation and a lack of issuance over the summer puts pressure on long-end yields.
The spread between 5-year and 30-year yields in both Germany and France has tightened by around 20 basis points in the past two weeks, and hit the lowest this year on Thursday. Softer inflation on both sides of the Atlantic, coupled with falling oil prices and continued bond-buying from the European Central Bank, has seen market participants reaching for yield in longer maturities.